A pledge to end rough sleeping. A minor reduction to the VAT rate on electricity, and now a £2 cap on bus fares. We can all debate whether it really amounts to the ‘biggest change in British politics in forty years’ and an ‘end to neoliberalism’ as the new Prime Minister Andy Burnham has promised. One point is clear, however. The amount of money at stake is starting to add up, and the money will have to come from somewhere. But can Burnham really cut spending?
As Mrs Thatcher once remarked, ‘the problem with socialism is that eventually you run out of other people’s money.’ That was always going to be true in the medium term, but even she probably didn’t expect it to happen quite so quickly. At his first cabinet meeting yesterday, Burnham asked his ministers to take a ‘hard look’ at their budgets and come up with some savings. He is only one day into his premiership and already he is scrabbling around trying to find more money.
It is not hard to see why. Burnham has made three significant spending announcements already and clearly has a ‘giveaway grid’ to roll out over the summer. Ending rough sleeping will cost £340 million, the VAT cut another £850 million, and the bus fare subsidy £454 million. Admittedly, within a total government spending of £1.3 trillion, these are small sums. And yet, so far they have all been paid by fiddling with the numbers.
Burnham wants to spend lots of money, but has no idea where to get it from
The VAT cut was ‘funded’ by scraping the digital ID scheme, but since that hadn’t been budgeted for anyway, that was hardly convincing. Meanwhile, the buses will be ‘paid for’ by switching the financing for international climate projects from grants to loans, which doesn’t make any difference to the amount of money going out of the door (or the total either, since the loans probably won’t be paid back). It is the kind of thing an accountant might come up with if they are trying to stave off bankruptcy for a few more days. A few desperate fiddles that won’t convince anyone for long.
The real problem for Burnham is that he wants to spend lots of money, but he has no idea where to get it from. Even if he doesn’t announce anything new, rescuing Thames Water will cost a fortune, the new nationalised British Steel will consume vast amounts of money, and so will the trains now taken back into public ownership. All the while, welfare bills will keep on rising. Departmental ‘savings’ won’t yield any extra cash.
If Burnham wanted to be bold, he could find some real money. The £21 billion committed to carbon capture projects could be scrapped, so could the £5.8 billion put into the National Wealth Fund, and of course, the £165 million a year set aside for giving away the Chagos Islands.
Burnham had years up in Manchester to prepare for government. He should have come up with a plan for substantial savings, which would have then allowed him to spend more where he thinks it is most needed. Instead, he is reduced to asking the cabinet to spend less on paperclips. That is not going to work – and very soon he is bound to realise that.
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